One of the things that plagues the contract IT worker is the worry over health insurance. I've been in situations many times when you're between companies/contracts and you get stuck footing a huge cobra insurance bill (I've had monthly premiums from cobra for the family at best $500 and at worst $1200). Now, there are several things I've always hated about health insurance, which I'm going to talk about first, then I'm going to talk about why I moved to the HSA plan (Thanks George Bush).
Group Rates
Group rates are a good idea right? right? Well, if you're like some of my coworkers over the years, group rates are great because they can be obese, smoking, drinking, and otherwise unhealthy people and they pay the same rate as I do! It always rubbed me the wrong way that my family is young, healthy, and in generally good shape but we have to pay the same rate as people with the above afflictions. That's how insurance works though, they're using my good health to hedge the risk of other's bad health. Still, when it comes down to it, I feel like I'm getting hosed.
Your Premium
In a traditional group health plan, you (or your company) pays your premium, and if you don't get sick, the money is gone. So at my most recent cobra rate- $623 a month, I was dropping $7426 in premiums alone into health insurance. Apart from maternity costs in recent years, my average utilization of health services has always been under $1500 a year. So basically I'm paying $7426 plus copays (which generally range $10-$25 per) for a $1500 benefit. If I get to the end of the year, the insurance company certainly doesn't say "hey, nice job staying healthy, here's half your premiums back.
Deductibles
Most of your group health insurance plans also carry a deductible that ranges from $250 - $1,000. This means that if you have a surgery, accident, or what have you outside of normal care, you chip in that deductible on top of the $7426 in premiums I paid. My last deductible amount was $500, so in the case of an accident, I would be out $7926 for the year.
Why the HSA is better for me
Health savings accounts are available for insurance holders who have a "high deductible" plan. A high deductible plan typically means for a family that the deductible is greater than $2,200 and less than $10,000. If you actually have a good cash flow/steady income and can bear the burden of paying a deductible of that amount, the cash savings can start rolling in.
Basically, the plan I selected has a family deductible of $5,200, this means the health insurance covers nothing until I have spent $5,200 out of my own pocket. After the $5,200 is met, they pay 100% of everything. For this plan, I pay $160 per month or $1920 per year, a cost savings on premiums alone of $5,506. Now, the majority of my healthcare expenses are wellness and vaccinations for my kids, so I added a rider for $51 / month that covers wellness and preventative check ups for the family, bringing my premium amount to $2,532, still holding down a substantial premium savings of $4,894 per year. Keep in mind that in the case of an accident with the old plan, I'd have to pay the deductible as well, so kick the $500 on to that $4,894 and it's a break even as far as cash out of pocket except with the HSA plan, if we don't have that big expenditure, we save up to $4,894. Putting that money instead into an IRA account would make me a millionaire at age 65.
The HSA part comes in by being allowed to make tax deductible contributions to a savings account that is earmarked for medical expenses. The bank that holds the account issues you a debit card that you can use to pay for your prescription drugs, office visits, etc. Basically anything that leads up to that deductible can be paid for out of this account... tax free (unlike your copays now). Being that I dropped my monthly payment from $636 to $211 with the plan alone, I am kicking $150 a month into the HSA account which should more than cover any medical expenses for the year given my family history. HSA plans, unlike flexible spending accounts roll over year to year and grow with interest. If you never use all of the HSA, when you hit 65 you can withdraw the money in the same style as an IRA, so if you are fortunate health wise, it's almost like a retirement account that you can use for today's medical expenses.
Conclusion
I'm very happy about switching over from an expensive plan to the more effective HSA plan. Not only do I stand to save some money, unlike group insurance premiums, the HSA account is my money, and if it doesn't get used it's still mine, unlike group premiums that disappear into paying for a lung transplant for a career smoker. I highly recommend this move for anyone that changes jobs a lot, does contract work, or has a young and healthy family and wants to take personal charge of their health expenses.